In Monetary Policy Report 3/20, which was published on 24 September, the policy rate forecast implied a rate at the current level over the next couple of years, followed by a gradual rise.

The Norwegian economy is in the midst of a deep downturn. So far, economic developments have largely been in line with the projections in the September Report. Activity has picked up further, but the level is still lower than prior to the pandemic. Unemployment has declined, but remains high. Increased Covid-19 infection rates and more containment measures abroad and in Norway will likely put a brake on the upswing in the coming period.

House prices have continued to rise. A long period of low interest rates increases the risk that financial imbalances are building up.

Underlying inflation has fallen, but is still higher than the inflation target. The effects of the krone depreciation earlier in 2020 are gradually fading. Together with prospects for low wage growth, this suggests that underlying inflation will moderate in the coming years.

In the Committee’s assessment, the sharp economic downturn and considerable uncertainty surrounding the outlook suggest keeping the policy rate on hold until there are clear signs that economic conditions are normalising.